A record pipeline of speculatively built logistics and industrial units signals growing confidence in the Midlands’ economy, according to experts at property consultants Knight Frank.
The firm’s recently published Logistics and Industrial Market Report reveals there is 3.8m sq ft of speculatively developed space set for delivery in the region in 2016/17.
Jon Ryan-Gill, partner and head of the industrial agency team at the Birmingham office of Knight Frank, claims this is unprecedented.
He said: “Take up of industrial and logistics space in the Midlands in 2015 reached 40 per cent of the UK total, more than double that of the second best performing market, London and the South East (19 per cent).
“As a result, availability has become a real issue. Currently there is just 7.6m sq ft of oven-ready space, equivalent to six months supply. Of this, 6.8m sq ft is second hand, hence developers are sufficiently confident to take a punt on getting sheds out of the ground without the safety net of a pre-let.”
In the second half of 2015, take-up of units in excess of 50,000 sq ft reached 7.5m sq ft. Five occupiers gobbled up more than 2.5 sq ft of space between them, including Amazon’s letting of 1m sq ft at Mountpark, Bardon; Howdens Joinery’s acquisition of 670,000 sq ft at Warth Park, Raunds, and Birmingham Wholesale Market’s 241,885 sq ft commitment at The Hub, Birmingham.
Knight Frank’s statistics show that the retail sector is the key driver of demand, accounting for 29 per cent of take up in the six months to December 2015. However, the manufacturing sector also put in a strong performance, taking 22 per cent of space.
Jon said: “Jaguar Land Rover’s decision to add 915,000 sq ft to its engine plant at i54 in Wolverhampton will take their site to 2.2million sq ft. This signals the car giant’s commitment to the region and will have a positive knock-on in the demand for space from their local supplier base.”
Although developers are building speculatively, the pre-let and pre-sale markets remain strong. In H2 2015, 68 per cent of take up fell into this category, including the Amazon and Birmingham Wholesale Markets deals, and DHL’s commitment to 237,258 sq ft at Rugby Gateway, Rugby.
According to the Knight Frank report, headline rents are £6.50 per sq ft in the West Midlands, with the East Midlands trailing at £6 per sq ft. The gap between new build and prime existing stock is around 50p per sq ft.